Sustainable growth still a distant dream

Though official documents state otherwise, there is little evidence, to claim that India has pursued a sustainable inclusive growth strategy, as the Five Year Plan formulation is not integrated with respect to participation in economic activity, income generation and welfare improvement. India has a long way to go even to conceptualise such a process, let alone its realisation, says Dr. M.H. Suryanarayana.

India has formulated two successive five year plans ‘Towards Faster and More Inclusive Growth’ and completed one. These Plan strategies are based on neither a clear-cut concept nor any perspective. The reference is to the recent Eleventh and Twelfth Five Year Plans.

Of course, the Twelfth Five Year Plan (2012-2017) (GoI 2013a) has made an attempt to provide multiple perspectives of inclusiveness. It lists the several dimensions of inclusiveness in terms of poverty reduction, group equality, regional balance, inequality reduction, empowerment and employment generation.

The Twelfth Plan has even attempted what may be called an evaluation of the Eleventh Plan strategy for ‘Inclusive Growth’. Its assessment runs as follows:

As regards policies and programmes to achieve inclusive growth, the Eleventh Five Year Plan, inter alia, has allocated 25 per cent of the total Central Budget Plan provision to rural development programmes. These programmes included the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) also (GoI 2013b). The MGNREGA generated more than 12 billion man days of work during the period 2006-07 to 2011-12 of which the STs and the SCs accounted for 55 per cent (GoI, 2013b; p. 286).

As regards achievements, the list contains conventional development outcome evaluation indicators such as GDP growth, poverty reduction, growth of real consumption, unemployment, real wages, immunisation rate and school enrolment rates. The achievements listed are as follows:

The economy has grown at the rate of 7.9 per cent during the Eleventh Plan (2007–08 to 2011–12) as against 7.6 per cent in the Tenth Plan (2002–03 to 2006–07) and only 5.7 per cent in the Ninth Plan (1997–98 to 2001–02).

The Plan claims that there was acceleration in agricultural growth at the average rate of 3.7 per cent, compared with 2.4 per cent in the Tenth Plan, and 2.5 per cent in the Ninth Plan.

The incidence of poverty has declined at the rate of 1.5 percentage points per year between 2004–05 and 2009–10. The Plan goes on to highlight that this rate was twice the rate at which it declined during the previous period 1993–94 to 2004–05.

As regards welfare, rural real consumption per capita increased at the rate of 3.4 per cent per annum during 2004–05 to 2011–12, that is, at a rate which is four times the rate in the previous period 1993–94 to 2004–05.

Unemployment rate declined from 8.2 per cent in 2004–05 to 6.6 per cent in 2009–10. This has reversed the discomforting scenario of the earlier period when it increased from 6.1 per cent in 1993–94 to 8.2 per cent in 2004–05.

Growth in rural real wages was 6.8 per cent per year in the Eleventh Plan (2007–08 to 2011–12) as against an average 1.1 per cent per year in the previous decade. The Plan attributes such a growth largely to its rural development programmes.

Complete immunization rate increased by 2.1 percentage points per year between 2002–04 and 2007–08, which in fact had declined by 1.7 percentage point per year between 1998–99 and 2002–04. There was also an increase in institutional deliveries (1.6 percentage points per year between 2002–04 and 2007–08) which is higher than the 1.3 percentage point increase per year between 1998–99 and 2002–04.

Net enrolment rate at the primary level (98.3 per cent) is almost universal in 2009–10. Dropout rate (classes I–VIII) declined by 1.7 percentage point per year (during 2003– 04 – 2009–10); this is twice the rate of decline (0.8 percentage point) between1998–99 and 2003–04.

According to the Twelfth Plan, the evidence presented above point to “greater inclusiveness of growth in recent years”. Let us evaluate the Twelfth Plan assessment of Eleventh Plan achievement on inclusive growth. How is this assessment different from any previous plan evaluation, which has been carried out in terms of the same indicators? If one goes through plans and their mid-term reviews, the tables for evaluation contain the same statistics. Such details constitute essentially a description of changes in summary measures of absolute deprivation and their major determinants. Of course, these estimates in general present favourable outcomes in different dimensions of absolute deprivation in the context specified. However, contrary to the claims made by the Planning Commission, they do not provide in any way any indication of the inclusive dimension of the growth process for the following reasons.

Scheduled Tribes totally left out of the mainstream growth process

Ideally a growth scenario to be called “inclusive” should enable greater participation of the poor in production, income generation and welfare improvement. It is only such a strategy that could ensure that the inclusiveness is sustainable. An assessment on these lines would call for up-to-date statistical profiles of the poor in employment, production, income and consumption distribution. In the absence of such details, one approach could be to examine their relative participation in the process if and when there is such an improvement for the population in general. If we measure general economic welfare in terms of median per capita household consumer expenditure in India, one measure of participation or inclusion of the poorest could be proportion of people with consumption less than 60 per cent of the median. If this number declines, it would show that the welfare status of the poor has increased proportionately more than the average and hence, there is an inclusive growth process. If, on the other hand, it increases, it would imply an era of exclusion of the poorest.

We have estimated such numbers for India using the available National Sample Survey household consumer expenditure distribution data sets. Our estimates show that the number for the country as a whole has increased from 12.60 per cent in 1993-94 to 13 per cent (2004-05), 13.20 (2009-10) and to 14.40 per cent (2011-12). As regards disparities in consumption across social groups the evidence is as follows: In rural India, average consumption levels of the Scheduled Tribes (STs) and the Scheduled Castes (SCs) fell short of the mainstream median while those of the Other Backward Classes (OBCs) and the Other Social Groups (OSGs) exceeded. The shortfall in consumption increased for the STs, declined for the SCs while the excess of the OBCs and the OSGs increased. Thus, the OBCs and the OSGs seem to be in the rural mainstream growth process while the SCs and STs have been left out. Evidence on urban India shows that the STs have been left out of the mainstream growth process.

No evidence of sustainable inclusive growth

In sum, there is little evidence, be it conceptual or empirical, to claim that India has pursued a sustainable inclusive growth strategy. Though official documents pat themselves with evidence on measures of absolute deprivation, relative distributional measures show the opposite. Even if they corroborate, there would not be any evidence of sustainable inclusive growth strategy since the Plan formulation is not integrated with respect to participation in economic activity, income generation and welfare improvement. India has a long way to go even to conceptualise such a process, let alone its realisation.

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